Yahoo auction could still yield surprises

Mike Snider

USA TODAY

The second round of bidding for Yahoo may have come to an end, but that doesn't mean the roster of potential buyers is final.

A third, and likely final, round of bids for the troubled Sunnyvale, Calif.-based Net company's core business and other assets is expected to begin next week. But don't discount the entry of additional bidders in this final round.

"Keep in mind that after the first round of bidding closed, nobody expected Warren Buffett or Dan Gilbert to be involved in this," said Eric Jackson, managing director of investment firm SpringOwl, a Yahoo shareholder that has pushed the company to replace senior management and slash its workforce.

Starboard Value and other activist investors urged the company to consider a sale after Yahoo abandoned plans for a spinoff of its stake in Chinese e-commerce giant Alibaba and began considering a tax-free spinoff of the company's core assets. Shareholders have voiced concerns because Yahoo CEO Marissa Mayer's nearly four-year turnaround plan has gained little traction.

Other bidders include strategic buyers — AT&T is among those reported to have made a bid — as well as private investment firm TPG, and an investment group including Bain Capital, Vista Equity Partners and former Yahoo CEO Ross Levinsohn.

"I think it's still possible we could hear from Comcast or somebody like a Fox as a potential strategic bidder in this last round," said Jackson, who expects Yahoo's board to announce a decision in early July.

Yahoo did not respond to a request for comment.

$5B BIDS

The company's board of directors is expected to meet Friday to select bids that will move on, CNBC reported Thursday, and conclude the auction by mid-July.

The company's strategic review committee is weighing several bids of $5 billion or more for the purchase of its core business, CNBC's David Faber reported, citing persons familiar with the situation.

Some of the bids of $5 billion or more are for Yahoo's core business, which includes its advertising technology, search, Tumblr and content such as Yahoo Sports and Yahoo Finance. Other bids that exceed the $5 billion mark include not only Yahoo's core business, but also some or all of the company's extensive patent portfolio and real estate, he said. "Yahoo actually seems to be running a fairly robust auction," he said on CNBC.

That's higher than has been floated recently. Three weeks ago, The Wall Street Journal reported that several potential buyers planned bids of $2 billion to $3 billion.

These numbers reported by CNBC "make more sense," said SunTrust Robinson Humphreys internet equity analyst Robert Peck. He has estimated that Yahoo's core business could fetch as much as $6 billion, with real estate and other assets included.

Verizon, long considered the likely winning bidder, submitted a bid of "a bit more than $3.5 billion," people told Faber. Some said that there is discussion as to whether Verizon would make a planned third and final round of bidding, he said.

The report could put pressure on Verizon to up its bid and potentially make an offer that "encompasses the patent and the real estate, which they might not have wanted before," Jackson said.

"I guess a skeptic would say about this report that maybe this is just the Yahoo bankers who leaked this to Faber because they want to get this out here and they want to put pressure on Verizon to do that," he said. "But even if that is true, the good news is that it is signaling to the market and to all these bidders that Yahoo’s board doesn’t want to consider anything less that $5 billion as a bid for these assets."